IP: A matter of deference: Courts and the new AIA post-grant proceedings

When drafting the America Invents Act (AIA), Congress hoped to encourage district courts to stay patent infringement cases if one of the new AIA post-grant proceedings was already underway. This would, Congress hoped, shift the task of addressing patent quality back to the U.S. Patent and Trademark Office (USPTO) where it arguably belonged. If a recent Federal Circuit ruling is any guide, this seems to be happening.

In Fresenius USA, Inc. v. Baxter International, Inc., the court held that when a USPTO post-grant proceeding determines that a patent is invalid, the patent owner “no longer has a viable cause of action. . . . Therefore, the pending litigation is moot.” The decision recognizes the curative role of the USPTO post-grant review and the importance of the USPTO acting to correct its own error in issuing the patent in the first place before undue mischief occurs in the court system.

The Fresenius decision demonstrates how important it is to use the speedier post-grant proceedings at the USPTO. District court judges will be more inclined to stay the district court proceedings when there is a filing of an AIA post-grant proceeding because of its timeliness and efficiency. Under Fresenius, the final decision of a post-grant proceeding will also now moot any court judgment.

Another surprise with the Fresenius decision was that the Federal Circuit found the claims invalid in the USPTO appeal when it had previously ruled the claims valid in the district court appeal. The difference outcomes are explainable when considering the mandatory deference given to the USPTO and its different validity standards.

The Fresenius decision demonstrates that “substantial evidence” deference given to a USPTO decision plays an important role in the final outcome of a Federal Circuit court decision. In Dickinson v. Zurko, the U.S. Supreme Court reversed the Federal Circuit’s decision that the proper standard of review for USPTO findings of fact is the clearly erroneous standard and remanded the case. The Supreme Court held that the standards set forth in the Administrative Procedure Act governed. Those standards are “arbitrary, capricious” and “unsupported by substantial evidence.” The Supreme Court’s remand ordered the Federal Circuit to determine the better APA standard for reviewing USPTO findings of fact. The Federal Circuit decided the substantial evidence standard is appropriate because it asks whether a reasonable fact finder could have arrived at the decision.

So, for fact-finding, the Federal Circuit applies the substantial evidence standard when reviewing a post-grant review proceeding decision. The court will affirm a Patent Trial and Appeal Board (PTAB) ruling if the fact finding is deemed sufficient, even if the individual judges of the court do not necessarily agree with the PTAB.

In addition to the substantial evidence deference, the new AIA post-grant proceedings have different standards than district court trial proceedings. In a district court trial, there is a presumption of validity of the claims of the patent. In post-grant review proceedings, there is no presumption of validity of the claims of the patent under review. In a district court trial procedure, claim construction is determined in a manner to preserve validity. In the new post-grant procedures, claim construction is determined by giving the claim “its broadest reasonable construction in light of the specification of the patent in which it appears.” In a district court trial procedure, the evidentiary standard is “clear and convincing.” For post-grant proceedings, the evidentiary standard is “preponderance of the evidence.” The different standards explain how it is possible that the PTAB could have a different ruling than a district court based upon the same facts.

Upon an appeal of a PTAB ruling, an appellant must show that the PTAB decision is unsupported by substantial evidence as applied to these more liberal standards. When these more liberal standards are paired with a higher deference given to PTAB decisions, appellants have an uphill battle to overturn a PTAB ruling.

Because it is difficult to overturn a PTAB ruling, it is very important to properly prepare for a post-grant trial to ensure a successful outcome. This requires mapping out a strategic plan with an understanding of the risks and benefits of each planned action and defense. In addition, because these are unique proceedings held before the PTAB, it is important to understand the PTAB culture, rules and procedures to ensure one is fully prepared for post-grant pre-trial procedures and post-grant trial.

This is for general information and is not intended to be and should not be taken as legal advice for any particular matter. It is not intended to and does not create any attorney-client relationship. The opinions expressed and any legal positions asserted in the article are those of the author and do not necessarily reflect the opinions or positions of Miles & Stockbridge P.C., its other lawyers, or InsideCounsel.